News release

Toronto

Toronto, Montreal, Calgary and Vancouver feeling the effects of the real estate boom

Toronto, June 25, 2014 – Canada's commercial real estate boom has led to an increasing number of office deliveries in Canada's quartet cities, which include Toronto, Montreal, Calgary and Vancouver. According to JLL's (NYSE:JLL) annual research Look Forward series, many tenants will be leaving large blocks of space behind for those developments, which are already substantially pre-leased.

In Vancouver – a market receiving 16 percent more Class A inventory by 2017 – planned office developments are currently 60 percent pre-leased. In Canada's largest business district, Toronto, seven developments will bring an additional five million square feet to Downtown, increasing overall office supply to 75 million square feet.

"As more and more offices are added to the various markets across Canada, we are going to see significant changes from both tenants and landlords," said Brett Miller, President of JLL Canada. "With large tenants pre-leasing considerable amounts of space in new buildings, they will be leaving large blocks of space behind, opening the door for new tenants to move in. We are likely to see an increase in landlord incentives in an attempt to appeal to the limited number of tenants who are looking to make a move into the mature office towers."

The trend continues in markets like Calgary, which features six buildings moving forward with development, where 4.9 million square feet will be delivered to market by 2018.

Effects of the Office Boom & the Changing WorkspaceMany of the buildings in development offer more than a prestigious new space. This new generation of Canadian commercial real estate is tailored to the emerging workplace, with large windows, open concept design, access to amenities and LEED® gold/platinum certifications. They appeal to large tenants looking to retain and attract employees.

"Large companies are taking steps to create spaces that will appeal to the greatest number of employees", said Miller. "As the next generation moves into the workforce, we are seeing a shift away from the traditional cubicle towards open layouts that foster collaboration and teamwork, and are conveniently located near amenities and transit."

The densification of the work place plays a key role as tenants aim to consolidate and reduce their footprints, a trend which has been fuelled by the changing work space. New developments are reflecting the changing needs of tenants by moving to open concepts to accommodate an increasing number of organizations moving from closed to shared spaces

As a way to attract millennials, many companies are seeking to stay at the forefront of trends. The majority of new developments have achieved sleek, modern designs, excellent public transit access and environmental sustainability. This are the values held by the next generations of workers. This shift has achieved a new prestigious and attractive identity for the millennials; separate than the identity established by the traditional bank towers for the Boomer generation. Look Forward - Market Highlights:Downtown Montreal:

The demand for new LEED® certified space has caused the biggest office building construction boom in over a decade across Downtown Montreal.

Market conditions have been deteriorating for the last 18 to 24 months and owners of second generation buildings are now left with more large blocks of empty space. As large tenants consolidate and rationalize space, there will be a sustained upwards pressure on vacancy rates across Downtown until at least 2016.

In the event that one of the major proposed development projects signs an anchor tenant and enters the construction phase, we would see vacancy rates rise above 12 percent across Downtown Montreal past 2017.

Downtown Calgary:

Husky and Nexen renewed in their current downtown locations after considering opportunities in both the suburban and downtown markets. This signaled to landlords and tenants alike that the will of energy companies to relocate to a suburban office market is presently insufficient. It is likely that Imperial Oil will remain the sole large energy company to be located in the suburban environment.

The 3 Eau Claire development was shelved indefinitely due to financing issues, while the Barron Building is now one step closer to pre-leasing after a change in heritage designation. This represents a revised total square footage of 4.9 million square feet coming to market by 2018, of which, only 25 percent is available on a head lease basis.

With the movement of medium sized tenants into backfill space correctly suited to their size, it is likely that older assets will need to work hard and attract a diversity of new, appropriately sized tenants.

Downtown Toronto:

By 2017, seven developments under construction will bring an additional five million square feet to Downtown Toronto, raising the office supply to more than 75 million square feet.

Collectively, tenants that have pre-leased in new developments are set to give back over 300,000 square feet; further increasing vacancy upon development delivery. Tenants anticipate better leverage with the increased supply.

Ivanhoé Cambridge has a newly proposed development at 45 Bay St. The site is its first Class A office building in Toronto (est. 1 million square feet).

There is a rising interest in leasehold investments, in some cases exceeding $300 per square foot. For tenants, the increased adoption of alternative workplace strategies to optimize mobility/productivity and lower on-going costs of space management is the key driver. For landlords, amortizing some of the improvement costs provides increased face revenue.

Downtown Vancouver:

The market is due to receive 16 percent increase in Class A inventory by 2017, of which, 60 percent has already been preleased.

With significant tenant movement, a pending flight to quality is evident as large occupiers prepare to vacate existing Class A buildings. In a market that continues to experience negative absorption, these subsequent backfill vacancies will face stiff competition for the limited number of large tenants searching for office space.

Almost 70 percent of Class A buildings in the Downtown Core are greater than 25 years in age. The upcoming inventory has launched a swift transition from a landlord-favourable market to a neutral environment. Faced with competition for tenants from state-of-the-art new construction, landlords of existing buildings have responded by re-evaluating their rental rate and offering increased tenant inducements to secure early, long term renewals with quality tenants.

JLL is Canada's fastest growing commercial real estate firm. JLL has two offices in Toronto, with the headquarters located downtown. The firm also operates in, Mississauga, Montreal, Ottawa, Vancouver, Calgary and Edmonton. JLL manages over 50 million square feet of facilities across Canada. The firm offers tenant and landlord representation, project and development services, investment sales, advisory and appraisal services, debt capital markets, and integrated facilities management services to owners and tenants in Canada.

About JLLJLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual fee revenue of $4 billion, JLL has more than 200 corporate offices and operates in 75 countries worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3 billion square feet and completed $99 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $48.0 billion of real estate assets under management. JLL is the brand name of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.